Anyone from Arkansas understand the new car wash tax?

[Dan-Ark]

Up till this month, in Arkansas, car washes were exempt from sales tax unless they had manual activites involved (prep, drying, etc). Self services, including automatics a customer couls start himself, were exempt. Now all car washes done in tunnels, automatics and self serve are tax free, also all purchases of supplies and repair parts are tax exempt. Sales taxes collected from full service or tunnels with labor are being replaced with water use fee on tunnels AND automatics. Self serve bays are expempt. I guess I have to install a separate meter on my automatic? this law is in effect as of 10-1. Kleen-right and car wash superstore just started charging taxes due to another part of this very same Arkansas law... taxing internet sales shipped into Arkansas... I logged on the the DFA site and I see no where to register to pay, have no idea how to measure my water to pay. first payment nov 20th. This mixing laws together to get enough representatives/senators interested in voting for them for one perk or another has got to stop. Rant off.

 

[mjwalsh]

Dan-Ark,

Sometimes ... it can do some good to do a bit of carefully orchestrated worthwhile justified ranting.

As someone who was somewhat blindsided by our state (ND) "use tax" going back 7 years back in about 1999 ... I am thinking about the possibility of your state could potentially do similar unpleasant audits ... with you being on the receiving end. Business people are the easy pickings ... it appeared to be the norm at the time. It might be worse now ... not sure.

Kleen-Right appears to be doing a good job based on the most recent invoices from them. I no longer have to parse out the vend items because I provided our sales tax permit to them. That means the "use tax"complication is no longer as difficult since their software does the calcs on the nonvended items which are subject to "use tax". That is one way of looking at the new coalition of tax collection between states within the USA. https://www.streamlinedsalestax.org/

Don't get me wrong ... I was was not happy about the couple of thousand that I had to cough up from the audit because it basically made IMHO almost every non business person in the state a criminal who did not voluntarily send in when they bought from out of state. I was thankful that they did not extend it to all including that categorized as "services" which both parties tried to get through via a bill on three separate legislative sessions. I personally testified several times in front of the committee during those years which I know helped make a difference preventative measure wise. Since our Capitol building is less than 2 miles (walking distance) from me ... I even presented written documentation at several tax studies based on "encouragement" from an attorney who specialized in "open records" law.

I was shocked at how callous the most entrenched part of the news media was when it came to the services gross taxing issue. A previously successful tax increasing bill removal "referendum leader" in our state told me personally face to face ... that unless they included the "service tax" extension on advertising ... we would not have a prayer. Go figure ... he was proved wrong ... Thank God. The value system of the people we elect does make a difference at every level of gov't!!!

 

[Randy]

It only took me about 2 minutes to find the tax info for Arkansas “Sales and Use Tax Section” on the DFA web site. Send Kleen-Rite a resell certificate and they won’t charge you the use tax or sales tax. In Washington State we pay sales tax on all sales at the car wash, vacuum, bays and vending, every city has a different tax rate at my car wash it’s 8.9% right off the top.

 

[mjwalsh]

It only took me about 2 minutes to find the tax info for Arkansas “Sales and Use Tax Section” on the DFA web site. Send Kleen-Rite a resell certificate and they won’t charge you the use tax or sales tax. In Washington State we pay sales tax on all sales at the car wash, vacuum, bays and vending, every city has a different tax rate at my car wash it’s 8.9% right off the top.

Dan-Ark,

Even if you are able to have Kleen-Rite not charge you for the use tax portion, for that portion it might be preferable to having you yourself parsing out that portion to send in to your state as the "use tax" part of your tax bill. The somewhat vicious auditor that I got ... went back 7 years & he did get into the specific items bought that were not for resale. Under the new format Kleen-Rite might not even be allowed to not collect the tax on the "in house usable supplies & repairs & new equipment etc".

The reason why our state requires us to pay not on what we buy at the wholesale level but on the sometimes much higher amount actual end retail for our items ... air fresheners or whatever are marked up by us. They want the highest gross level because that way they get the most amount of tax revenue.

I am not sure but it is possible some our 50 States in our Union are refusing or delaying joining the so-called Streamline Tax Coalition. When I attended the tax studies back in 2001 & 2003 it was apparent that most of the state governments' have been diligently trying to resolve the fact that some of the general public were avoiding paying consumption taxes.

It looks like in the state of Washington & a few other states the ones with political power ventured into the "service tax" area which like Randy laments from time to time is "really tough" in terms of much greater amounts for the car washing portion liability. Laundromat owners in Washington not too long ago finally made strong enough arguments to get their self service usage gross % liability taken off. The Coin Laundry Association considered that "service portion" as something very much needed to be taken off.

Sometimes the voters think that sales tax is so much better than property or income & sooo much less complicated but they have to be shown that it is not quite that simple ... not to mention the actual larger amounts transferred from businesses that could be used in a much better way by hopefully the more stewardship oriented individual business owners. Credibility & accurate communication of that credibility is what tips the scale with voters IMHO!

 

[Dan-Ark]

No sales tax on most car wash services now, including tunnels and purchases are tax exempt for car wash supplies and maintenance items. It probably works just like retail sales tax at my other business, but instead of reporting sales to pay tax its .basically $.002 (2 tenths of a cent) per gallon on 80% of the gallons used in the automatic and no tax due on self serve bay water... guess I need to install a meter on my automatic in addition to the main meter, that or calculate how many gallons each of my 4 wash choices use in my D&S and use the counter on the machine. From what I hear, the tunnel guys complained the tax was unfair (even though they should have been collcting and paying sales tax if they prepped or dried etc) so the automatic owners got sucked in . Now the tunnels don't have to collect sales tax either, but they pay twice the rate per gallon water use tax instead. I think they may come out ahead. Just a pain for the small washes with an auto bay. lots of records and reporting.

 

[soonermajic]

Got a friend w/ multiple washes in Ark & he is PISSED!!

 

[Dan-Ark]

I figure for my little wash, the tax will be about 3.00 a month. Its the hassle of reporting that irritates me. the tunnels and expresses that do prep win because they wont have to collect and report sales tax, just pay water use "fee" (no one voted but reps and senators). The tunnel guys thought the automatic guys were going to be too hard to compete with if they didnt have to pay the fee too.... yeah right. I'm OK because no I no longer have to pay sales tax or use tax on chemcials, supplys, repair parts used in the wash... I know that will be WAY more than 3.00 a month! Its a win far as I can see.

 

[mjwalsh]

Dan-Ark,

Are you sure that if you have a car wash parts depot (in your state) that they do not charge you sales tax on parts etc? If they are required to charge you ... then my understanding with the new "Streamlined Stipulations" you either will be charged ... by an out of state seller ... or be responsible on a quarterly basis yourself. The tax not charged by an out of state seller then becomes defined as "use tax". In our state you have to send in the specific "use" tax equivalent or run the risk of future penalties & interest etc. Arkansas like our state North Dakota is listed as a full member of the new "Streamlined" stipulations.

If you have not already ... you might need to thoroughly verify with a knowledgeable enough local accounting firm or a specific state employee familiar with the current sales-use tax to make sure you don't get blindsided later on by a potentially vicious auditor. The tax based on water use you or a tunnel uses refers to ... appears to be the lawmakers avoiding a total service portion exemption ... which most states tend to have an exemption for???

 

[Dan-Ark]

I have only ordered online. Since Wayfair supreme court case Arkansas Does charge tax on taxable sales even if purchased out of state and yes Use tax applies if you purchase items for use that you purchased without getting taxed. However, the new law exempts purchases of goods used in the car wash. In arkansas, this is also part of Act 822. the portion of Act 822 that affects carwashes (per state agency responsible for collecting sales tax and also water "fee":

Act 822: Exempts from state and local sales tax the sale of car wash services and ancillary services when provided through an “automatic car wash”, a “car wash tunnel” or a “self-service bay”. Car wash services performed in any other manner remain subject to state and local sales tax. For purposes of the Act, an "Automatic car wash" means a car wash bay that provides a car wash using mechanical equipment that cleans the motor vehicle while the motor vehicle remains stationary. A "Car wash tunnel" means a car wash bay that provides a fully automated car wash in which the motor vehicle is moved through a tunnel by a conveyor system. “Ancillary services” are defined as services provided by a car wash operator in conjunction with the sale of a service through an automatic car wash, a car wash tunnel, or a self-service bay that involves the cleaning of interior or exterior, or both, of a motor vehicle. The Act also provides an exemption for goods and services purchased by car washes for use in an automatic car wash, a car wash tunnel, or a self-service bay or as part of an ancillary service. Act 822: Levies fees on car wash operators based on water consumed by “Car Wash Tunnels” and “Automatic Car Washes”. This tax does not apply to water consumed in self-service bays.